Lecture: Ikea's Expansion and Challenges in the Indian Market

Ikea's Global Presence

• Largest furniture retailer globally since 2008
• Known as the 'Blue Box'
• 472 stores worldwide
• Presence in 64 countries across five continents
• Revenue in 2023: $51 billion USD
• Main Markets: Europe and America (~73% of stores)
  • Europe: 277 stores
  • America: significant contribution to revenue

Expansion in India

• Rapidly growing market with increasing per capita consumption
• Entered Indian market in 2018

Challenges in India

Historical and Regulatory Barriers

• First attempted to enter in 2006, permission denied
• Reapplied in 2012 after regulatory changes
  • Allowed full foreign ownership of single brand retail
  • Relaxed local sourcing requirements

Market Characteristics

• Furniture market demand in India: $6.2 billion (2019) projected to grow to $24.4 billion (2035)
• Dominated by local, unbranded players (90%)
• Only 10% are branded players
• Preference for ready-made furniture due to cheap labor
  • Carpenters available for less than $110 per 10-hour job

Ikea’s Strategies in India

• Set up a 150-member task force for furniture assembly
• Partnership with UrbanClap for carpentry services
• Local carpentry cost: $364 for 30-minute job (UrbanClap)
• TaskRabbit in the US charges a minimum of $36
• Master plan to reduce imports, increase local manufacturing
  • Aims to reduce import duty costs
  • India to become a major sourcing market

Store Location Challenges

• $1.5 billion investment in India
  • $750 million spent on procuring sites for 4 stores
• Stores typically located outside city areas
  • Higher real estate costs within cities
  • Preference for local shopping to save time
• Opening smaller stores to reduce operating expenses
  • Sample displays with catalog screens for ordering
  • Reduces big store costs, net loss

Competition and Market Dynamics

• Competing with Walmart, which owns Flipkart
• Indian competitors: Pepperfry, Urban Ladder, Amazon's local website
• Fragmented and competitive market

Indian Consumer Preferences

• Indian consumer preferences are unique and diverse
• Difficulty for international brands to understand and cater to